diff --git a/CHANGELOG.md b/CHANGELOG.md
index 4c7c199062..f380198e9e 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -30,6 +30,7 @@
 - Improve option optimization for constants. https://github.com/rescript-lang/rescript/pull/7913
 - Option optimization: do not create redundant local vars. https://github.com/rescript-lang/rescript/pull/7915
 - Js output: remove superfluous newline after every `if`. https://github.com/rescript-lang/rescript/pull/7920
+- Rewatch: Traverse upwards for package resolution in single context projects. https://github.com/rescript-lang/rescript/pull/7896
 
 #### :house: Internal
 
diff --git a/rewatch/src/config.rs b/rewatch/src/config.rs
index b0e192a28e..2d2c0e8d98 100644
--- a/rewatch/src/config.rs
+++ b/rewatch/src/config.rs
@@ -352,7 +352,7 @@ pub fn flatten_ppx_flags(
                             let path = helpers::try_package_path(
                                 package_config,
                                 project_context,
-                                format!("{}{}{}", &package_config.name, MAIN_SEPARATOR, y).as_str(),
+                                &format!("{}{}{}", &package_config.name, MAIN_SEPARATOR, y),
                             )
                             .map(|p| p.to_string_lossy().to_string())?;
 
@@ -374,7 +374,7 @@ pub fn flatten_ppx_flags(
                         Some('.') => helpers::try_package_path(
                             package_config,
                             project_context,
-                            format!("{}{}{}", package_config.name, MAIN_SEPARATOR, &ys[0]).as_str(),
+                            &format!("{}{}{}", package_config.name, MAIN_SEPARATOR, &ys[0]),
                         )
                         .map(|p| p.to_string_lossy().to_string())?,
                         _ => helpers::try_package_path(package_config, project_context, &ys[0])
diff --git a/rewatch/src/helpers.rs b/rewatch/src/helpers.rs
index 9a85f94e99..553190c488 100644
--- a/rewatch/src/helpers.rs
+++ b/rewatch/src/helpers.rs
@@ -9,6 +9,7 @@ use std::fs::File;
 use std::io::Read;
 use std::io::{self, BufRead};
 use std::path::{Component, Path, PathBuf};
+
 use std::time::{SystemTime, UNIX_EPOCH};
 
 pub type StdErr = String;
@@ -31,6 +32,36 @@ pub mod emojis {
     pub static LINE_CLEAR: &str = "\x1b[2K\r";
 }
 
+// Cached check: does the given directory contain a node_modules subfolder?
+fn has_node_modules_cached(project_context: &ProjectContext, dir: &Path) -> bool {
+    match project_context.node_modules_exist_cache.read() {
+        Ok(cache) => {
+            if let Some(exists) = cache.get(dir) {
+                return *exists;
+            }
+        }
+        Err(poisoned) => {
+            log::warn!("node_modules_exist_cache read lock poisoned; recovering");
+            let cache = poisoned.into_inner();
+            if let Some(exists) = cache.get(dir) {
+                return *exists;
+            }
+        }
+    }
+    let exists = dir.join("node_modules").exists();
+    match project_context.node_modules_exist_cache.write() {
+        Ok(mut cache) => {
+            cache.insert(dir.to_path_buf(), exists);
+        }
+        Err(poisoned) => {
+            log::warn!("node_modules_exist_cache write lock poisoned; recovering");
+            let mut cache = poisoned.into_inner();
+            cache.insert(dir.to_path_buf(), exists);
+        }
+    }
+    exists
+}
+
 /// This trait is used to strip the verbatim prefix from a Windows path.
 /// On non-Windows systems, it simply returns the original path.
 /// This is needed until the rescript compiler can handle such paths.
@@ -106,6 +137,25 @@ pub fn package_path(root: &Path, package_name: &str) -> PathBuf {
     root.join("node_modules").join(package_name)
 }
 
+// Tap-style helper: cache and return the value (single clone for cache insert)
+fn cache_package_tap(
+    project_context: &ProjectContext,
+    key: &(PathBuf, String),
+    value: PathBuf,
+) -> anyhow::Result<PathBuf> {
+    match project_context.packages_cache.write() {
+        Ok(mut cache) => {
+            cache.insert(key.clone(), value.clone());
+        }
+        Err(poisoned) => {
+            log::warn!("packages_cache write lock poisoned; recovering");
+            let mut cache = poisoned.into_inner();
+            cache.insert(key.clone(), value.clone());
+        }
+    }
+    Ok(value)
+}
+
 /// Tries to find a path for input package_name.
 /// The node_modules folder may be found at different levels in the case of a monorepo.
 /// This helper tries a variety of paths.
@@ -114,14 +164,9 @@ pub fn try_package_path(
     project_context: &ProjectContext,
     package_name: &str,
 ) -> anyhow::Result<PathBuf> {
-    // package folder + node_modules + package_name
-    // This can happen in the following scenario:
-    // The ProjectContext has a MonoRepoContext::MonorepoRoot.
-    // We are reading a dependency from the root package.
-    // And that local dependency has a hoisted dependency.
-    // Example, we need to find package_name `foo` in the following scenario:
-    // root/packages/a/node_modules/foo
-    let path_from_current_package = package_config
+    // try cached result first, keyed by (package_dir, package_name)
+    let pkg_name = package_name.to_string();
+    let package_dir = package_config
         .path
         .parent()
         .ok_or_else(|| {
@@ -129,8 +174,33 @@ pub fn try_package_path(
                 "Expected {} to have a parent folder",
                 package_config.path.to_string_lossy()
             )
-        })
-        .map(|parent_path| helpers::package_path(parent_path, package_name))?;
+        })?
+        .to_path_buf();
+
+    let cache_key = (package_dir.clone(), pkg_name.clone());
+    match project_context.packages_cache.read() {
+        Ok(cache) => {
+            if let Some(cached) = cache.get(&cache_key) {
+                return Ok(cached.clone());
+            }
+        }
+        Err(poisoned) => {
+            log::warn!("packages_cache read lock poisoned; recovering");
+            let cache = poisoned.into_inner();
+            if let Some(cached) = cache.get(&cache_key) {
+                return Ok(cached.clone());
+            }
+        }
+    }
+
+    // package folder + node_modules + package_name
+    // This can happen in the following scenario:
+    // The ProjectContext has a MonoRepoContext::MonorepoRoot.
+    // We are reading a dependency from the root package.
+    // And that local dependency has a hoisted dependency.
+    // Example, we need to find package_name `foo` in the following scenario:
+    // root/packages/a/node_modules/foo
+    let path_from_current_package = helpers::package_path(&package_dir, package_name);
 
     // current folder + node_modules + package_name
     let path_from_current_config = project_context
@@ -148,18 +218,76 @@ pub fn try_package_path(
     // root folder + node_modules + package_name
     let path_from_root = package_path(project_context.get_root_path(), package_name);
     if path_from_current_package.exists() {
-        Ok(path_from_current_package)
+        cache_package_tap(project_context, &cache_key, path_from_current_package)
     } else if path_from_current_config.exists() {
-        Ok(path_from_current_config)
+        cache_package_tap(project_context, &cache_key, path_from_current_config)
     } else if path_from_root.exists() {
-        Ok(path_from_root)
+        cache_package_tap(project_context, &cache_key, path_from_root)
     } else {
+        // As a last resort, when we're in a Single project context, traverse upwards
+        // starting from the parent of the package root (package_config.path.parent().parent())
+        // and probe each ancestor's node_modules for the dependency. This covers hoisted
+        // workspace setups when building a package standalone.
+        if project_context.monorepo_context.is_none() {
+            match package_config.path.parent().and_then(|p| p.parent()) {
+                Some(start_dir) => {
+                    return find_dep_in_upward_node_modules(project_context, start_dir, package_name)
+                        .and_then(|p| cache_package_tap(project_context, &cache_key, p));
+                }
+                None => {
+                    log::debug!(
+                        "try_package_path: cannot compute start directory for upward traversal from '{}'",
+                        package_config.path.to_string_lossy()
+                    );
+                }
+            }
+        }
+
         Err(anyhow!(
             "The package \"{package_name}\" is not found (are node_modules up-to-date?)..."
         ))
     }
 }
 
+fn find_dep_in_upward_node_modules(
+    project_context: &ProjectContext,
+    start_dir: &Path,
+    package_name: &str,
+) -> anyhow::Result<PathBuf> {
+    log::debug!(
+        "try_package_path: falling back to upward traversal for '{}' starting at '{}'",
+        package_name,
+        start_dir.to_string_lossy()
+    );
+
+    let mut current = Some(start_dir);
+    while let Some(dir) = current {
+        if has_node_modules_cached(project_context, dir) {
+            let candidate = package_path(dir, package_name);
+            log::debug!("try_package_path: checking '{}'", candidate.to_string_lossy());
+            if candidate.exists() {
+                log::debug!(
+                    "try_package_path: found '{}' at '{}' via upward traversal",
+                    package_name,
+                    candidate.to_string_lossy()
+                );
+                return Ok(candidate);
+            }
+        }
+        current = dir.parent();
+    }
+    log::debug!(
+        "try_package_path: no '{}' found during upward traversal from '{}'",
+        package_name,
+        start_dir.to_string_lossy()
+    );
+    Err(anyhow!(
+        "try_package_path: upward traversal did not find '{}' starting at '{}'",
+        package_name,
+        start_dir.to_string_lossy()
+    ))
+}
+
 pub fn get_abs_path(path: &Path) -> PathBuf {
     let abs_path_buf = PathBuf::from(path);
 
diff --git a/rewatch/src/project_context.rs b/rewatch/src/project_context.rs
index edf35e1b4d..439e3d58e2 100644
--- a/rewatch/src/project_context.rs
+++ b/rewatch/src/project_context.rs
@@ -1,12 +1,13 @@
 use crate::build::packages;
 use crate::config::Config;
 use crate::helpers;
-use ahash::AHashSet;
+use ahash::{AHashMap, AHashSet};
 use anyhow::Result;
 use anyhow::anyhow;
 use log::debug;
 use std::fmt;
-use std::path::Path;
+use std::path::{Path, PathBuf};
+use std::sync::RwLock;
 
 pub enum MonoRepoContext {
     /// Monorepo root - contains local dependencies (symlinked in node_modules)
@@ -21,6 +22,8 @@ pub enum MonoRepoContext {
 pub struct ProjectContext {
     pub current_config: Config,
     pub monorepo_context: Option<MonoRepoContext>,
+    pub node_modules_exist_cache: RwLock<AHashMap<PathBuf, bool>>, // caches whether a directory contains a node_modules subfolder
+    pub packages_cache: RwLock<AHashMap<(PathBuf, String), PathBuf>>, // caches full results of helpers::try_package_path per (package_dir, package_name)
 }
 
 fn format_dependencies(dependencies: &AHashSet<String>) -> String {
@@ -130,6 +133,8 @@ fn monorepo_or_single_project(path: &Path, current_config: Config) -> Result<Pro
         Ok(ProjectContext {
             current_config,
             monorepo_context: None,
+            node_modules_exist_cache: RwLock::new(AHashMap::new()),
+            packages_cache: RwLock::new(AHashMap::new()),
         })
     } else {
         Ok(ProjectContext {
@@ -138,6 +143,8 @@ fn monorepo_or_single_project(path: &Path, current_config: Config) -> Result<Pro
                 local_dependencies,
                 local_dev_dependencies,
             }),
+            node_modules_exist_cache: RwLock::new(AHashMap::new()),
+            packages_cache: RwLock::new(AHashMap::new()),
         })
     }
 }
@@ -187,6 +194,8 @@ impl ProjectContext {
                             monorepo_context: Some(MonoRepoContext::MonorepoPackage {
                                 parent_config: Box::new(workspace_config),
                             }),
+                            node_modules_exist_cache: RwLock::new(AHashMap::new()),
+                            packages_cache: RwLock::new(AHashMap::new()),
                         })
                     }
                     Ok(_) => {
diff --git a/rewatch/testrepo/package.json b/rewatch/testrepo/package.json
index 4de0800eac..f54aef232d 100644
--- a/rewatch/testrepo/package.json
+++ b/rewatch/testrepo/package.json
@@ -16,7 +16,8 @@
       "packages/file-casing-no-namespace",
       "packages/pure-dev",
       "packages/with-ppx",
-      "packages/nohoist"
+      "packages/nohoist",
+      "packages/standalone"
     ],
     "nohoist": [
       "rescript-bun"
@@ -26,11 +27,11 @@
     "rescript": "12.0.0-beta.1"
   },
   "scripts": {
-    "build": "../target/release/rewatch build .",
+    "build": "../target/release/rescript build .",
     "build:rescript": "rescript legacy build",
-    "watch": "../target/release/rewatch watch .",
+    "watch": "../target/release/rescript watch .",
     "watch:rescript": "rescript legacy watch",
-    "clean": "../target/release/rewatch clean .",
+    "clean": "../target/release/rescript clean .",
     "clean:rescript": "rescript clean"
   }
 }
diff --git a/rewatch/testrepo/packages/standalone/package.json b/rewatch/testrepo/packages/standalone/package.json
new file mode 100644
index 0000000000..3d21e324b0
--- /dev/null
+++ b/rewatch/testrepo/packages/standalone/package.json
@@ -0,0 +1,7 @@
+{
+    "name": "@testrepo/standalone",
+    "version": "1.0.0",
+    "dependencies": {
+        "@testrepo/dep01": "*"
+    }
+}
diff --git a/rewatch/testrepo/packages/standalone/rescript.json b/rewatch/testrepo/packages/standalone/rescript.json
new file mode 100644
index 0000000000..c04ff06f22
--- /dev/null
+++ b/rewatch/testrepo/packages/standalone/rescript.json
@@ -0,0 +1,13 @@
+{
+    "name": "standalone",
+    "sources": {
+        "dir": "src",
+        "subdirs": true
+    },
+    "package-specs": {
+        "module": "es6",
+        "in-source": true
+    },
+    "suffix": ".mjs",
+    "dependencies": ["@testrepo/dep01"]
+}
\ No newline at end of file
diff --git a/rewatch/testrepo/packages/standalone/src/Standalone.mjs b/rewatch/testrepo/packages/standalone/src/Standalone.mjs
new file mode 100644
index 0000000000..18efa44368
--- /dev/null
+++ b/rewatch/testrepo/packages/standalone/src/Standalone.mjs
@@ -0,0 +1,13 @@
+// Generated by ReScript, PLEASE EDIT WITH CARE
+
+import * as Dep01 from "@testrepo/dep01/src/Dep01.mjs";
+
+function standalone() {
+  Dep01.log();
+  console.log("standalone");
+}
+
+export {
+  standalone,
+}
+/* Dep01 Not a pure module */
diff --git a/rewatch/testrepo/packages/standalone/src/Standalone.res b/rewatch/testrepo/packages/standalone/src/Standalone.res
new file mode 100644
index 0000000000..202c4f430a
--- /dev/null
+++ b/rewatch/testrepo/packages/standalone/src/Standalone.res
@@ -0,0 +1,4 @@
+let standalone = () => {
+    Dep01.log()
+    Js.log("standalone")
+}
\ No newline at end of file
diff --git a/rewatch/testrepo/yarn.lock b/rewatch/testrepo/yarn.lock
index 153c6db527..5b46a73174 100644
--- a/rewatch/testrepo/yarn.lock
+++ b/rewatch/testrepo/yarn.lock
@@ -164,6 +164,14 @@ __metadata:
   languageName: unknown
   linkType: soft
 
+"@testrepo/standalone@workspace:packages/standalone":
+  version: 0.0.0-use.local
+  resolution: "@testrepo/standalone@workspace:packages/standalone"
+  dependencies:
+    "@testrepo/dep01": "npm:*"
+  languageName: unknown
+  linkType: soft
+
 "@testrepo/with-dev-deps@workspace:packages/with-dev-deps":
   version: 0.0.0-use.local
   resolution: "@testrepo/with-dev-deps@workspace:packages/with-dev-deps"
diff --git a/rewatch/tests/compile.sh b/rewatch/tests/compile.sh
index 6e98209466..9287eada3f 100755
--- a/rewatch/tests/compile.sh
+++ b/rewatch/tests/compile.sh
@@ -34,6 +34,21 @@ else
   exit 1
 fi
 
+# Build from standalone package folder using `rescript build`
+bold "Test: Standalone package can build via rescript from package folder"
+pushd ./packages/standalone > /dev/null
+error_output=$("../../$REWATCH_EXECUTABLE" build 2>&1)
+if [ $? -eq 0 ];
+then
+  success "Standalone package built"
+else
+  error "Error building standalone package"
+  printf "%s\n" "$error_output" >&2
+  popd > /dev/null
+  exit 1
+fi
+popd > /dev/null
+
 node ./packages/main/src/Main.mjs > ./packages/main/src/output.txt
 
 mv ./packages/main/src/Main.res ./packages/main/src/Main2.res